August 3rd, 2017

 

Daily Market Commentary

 

 

Canadian Headlines

• Home prices in Canada’s largest city posted their biggest monthly drop in at least 17 years in July and sales plunged as government efforts to cool the market and the near-collapse of a mortgage lender made buyers leery. The benchmark property price, which tracks a typical property over time, dropped 4.6 percent to C$773,000 ($613,000) from June. That’s the biggest monthly drop since records for the price index began in 2000.
• Home Capital Group Inc., the Canadian mortgage lender trying to rebuild itself with the help of Warren Buffett, is clawing back after near-collapse. The Toronto-based company reported second-quarter results that showed a growing funding base, according to a statement late Wednesday. With its capital position improving, the lender said that uncertainty about its ability to continue as a going concern is resolved.

 

 

World Headlines

• Declines in energy and banking shares depressed European stocks, offsetting earnings-related gains in companies including Next Plc and UniCredit SpA. The Stoxx Europe 600 Index was steady at 378.61 at 8:29 a.m. in London. The benchmark has struggled to recover since it reached a three-month low last week amid carmaker woes and a strengthening euro, and it’s lagging global peers.
• Hong Kong stocks fell from the highest levels since June 2015 amid signs that recent gains were overdone. Standard Chartered Plc tumbled the most in more than a year after its chief executive officer sounded a growth warning.
• Oil traded near $50 a barrel as investors weighed declining U.S. stockpiles against rising output. Futures added 0.3 percent in New York, extending their 0.9 percent gain on Wednesday. U.S. crude inventories dropped by 1.53 million barrels last week, while gasoline supplies fell for a seventh week.
• Global gold demand dropped to a two-year low in the second quarter as reduced investment in exchange-traded products outweighed higher jewelry and bar purchases. Total demand slipped 10 percent from a year earlier to 953.4 metric tons, the lowest since the second quarter of 2015, the World Gold Council said in a report Thursday. The decline was almost entirely due to ETF investors, who cut buying by 76 percent from last year’s high level.
• Germany’s economy slowed more than initially estimated at the start of the third quarter, leaving it trailing the euro region’s other large nations. IHS Markit’s German composite Purchasing Managers Index for July dropped to 54.7, down from 56.4 in June and missing the 55.1 flash reading. That’s a 10-month low and the first time in more than 12 years that the survey for Germany has lagged France, Italy and Spain.
• The Bank of England cut its forecasts for economic growth and wages as it extended keeping its benchmark rate at a record low. The downgrades, linked to Brexit, were enough for the majority of the Monetary Policy Committee to keep their cautious stance, with the vote for no change coming in as expected at 6-2.
• Aetna Inc. surprised investors with a large forecast increase, boosted by strong results from the business that offers health insurance coverage to employers last quarter. The health insurer now expects profit of $9.45 to $9.55 a share this year, excluding some items, up from a previous forecast of $8.80 to $9, according to a statement Thursday. The new guidance is largely above the $8.99 average of analysts’ estimates compiled by Bloomberg. Second-quarter earnings also topped predictions.
• Business conditions in India have deteriorated the most since the global financial crisis as the roll out of a nationwide sales tax disrupted supply and distribution links just months after Prime Minister Narendra Modi’s cash ban roiled markets. The Nikkei India Composite PMI Output Index fell to 46 in July from 52.7 in June, the steepest drop since March 2009, a report showed Thursday.
• Teva Pharmaceutical Industries Ltd., the world’s largest maker of generic medicines, cut its 2017 profit forecast for the second time and slashed its dividend by 75 percent amid eroding prices and delays in approval for cheap copycat medicines in the U.S., its largest market.
• China sought to stabilize the deteriorating trade relationship with the U.S., as the prospect of an investigation by the Trump administration on intellectual property raised the risk of tit-for-tat measures from Beijing. U.S. officials are gearing up to investigate China over what the administration perceives to be violations of intellectual property, said a government official who spoke on condition of anonymity on Wednesday because the probe hasn’t been announced.
• The U.S. labor market — marked this year by solid job gains, modest wage growth and falling unemployment — probably delivered more of the same in July. Job vacancies remain elevated and point to ongoing demand, while the economy has kept expanding amid healthier household incomes, relatively strong consumer confidence and global growth that’s providing more support to U.S. exporters.
• Siemens AG is planning an initial public offering of its health-care division in the first half of 2018 as Chief Executive Officer Joe Kaeser takes a further step in streamlining the engineering conglomerate, which reported quarterly profit that missed estimates. The IPO will give the unit resources to make acquisitions, and the shares could be listed in the U.S. or Germany, the Munich-based company said Thursday.
• Tesla Inc.’s Elon Musk keeps getting the green light to do what it takes to bring electric cars to the masses, regardless of how much it’s going to cost. The company burned through $1.16 billion in cash during the second quarter by spending on capacity for its cheapest model yet and boosting battery output.
• General Motors Co. sold $3 billion of bonds to help bring to a close its long and unsuccessful venture into Europe. The longest portion of the four-part offering was a 30-year bond that yields around 2.55 percentage points above Treasuries, according to data compiled by Bloomberg. That’s down from initial talk of 2.7 percentage points, according to a person with knowledge of the matter, who asked not to be identified as the deal is private.
• Molina Healthcare Inc. is cutting costs, shrinking its headcount and exiting some Obamacare markets after the health insurer posted a steep second-quarter loss, three months after pushing out the brothers who’d led the firm their father founded. The company said it’s eliminating about 1,500 jobs as part of a restructuring plan that it hopes will save $300 million to $400 million by late next year.
• A consortium controlled by a Macquarie Group Ltd. fund and an affiliate of Singapore’s GIC Pte are offering to buy almost one-third of Philippine geothermal company Energy Development Corp. for 64.5 billion pesos ($1.3 billion).
• BMW AG is setting its sights on the future, with plans to boost spending on electric cars and self-driving features in an effort to move on from the German auto industry’s diesel woes. A day after agreeing to upgrade newer diesel cars and offer trade-in incentives on older models, BMW underscored its focus on managing the transition to an era of electric-powered robo-taxis.
• Dish Network Corp.’s pay-TV customer losses eased last quarter, giving Chairman Charlie Ergen breathing room to work on plans for his company’s massive stockpile of unused airwaves. The satellite TV service lost 196,000 subscribers in the second quarter, compared with a decline of 281,000 a year earlier, according to astatement from the Englewood, Colorado-based company. Analysts expected a drop of 233,667. The drop still marks one the worst quarters ever for Dish.
• SoftBank Group Corp. has plowed $250 million into online lender Kabbage Inc., the latest in a flurry of big bets on mature startups by the Japanese technology company. Kabbage will use the new money to expand its lending products for small businesses and, if there’s a demand, offer new products like insurance and payroll services.
• Six-months after completing a life-affirming $13 billion-euro ($15.4 billion) capital increase, UniCredit SpA is starting widen the gap with Italian rivals. Chief Executive Officer Jean Pierre Mustier defied expectations that the bank couldn’t keep up earnings growth in the second-quarter, posting net income of 945 million euros that far exceeded analyst estimates for profit of 587 million euros.
• Noble Group Ltd. received a fresh broadside from Iceberg Research as the trader’s long-time foe predicted that the commodity company will probably fail, while telling executives that the anonymous commentator won’t be silenced by being sued. The trader’s shares fell.
• Indonesia wants Chevron Corp. and ConocoPhillips to submit proposals to renew their licenses to operate oil and gas fields as the former OPEC member seeks to reverse a decline in energy investments. Energy and Mineral Resources Minister Ignasius Jonan asked Chevron executives last week to inform the ministry about the explorer’s plans for Indonesian operations beyond 2021.
• Vincom Retail, the Vietnamese mall operator backed by Warburg Pincus, is planning a domestic initial public offering that could become the country’s biggest share sale in a decade, people with knowledge of the matter said. The unit of Vingroup JSC, Vietnam’s largest developer, has selected investment banks to work on the offering and aims to sell shares as soon as this year, according to the people. It aims to raise about $600 million, which may include a sale of existing shares as well as new stock.
• Global Payments Inc. agreed to buy units of Active Network from Vista Equity Partners for $1.2 billion in cash and stock, adding cloud-based software and technology to serve clients in the health and fitness segments.
• MTN Group Ltd. said a Nigerian listing that it agreed to as part of a $1 billion regulatory fine was on track and would take place within the next six to 12 months. Africa’s largest wireless carrier will approach institutional and private investors in Nigeria and abroad to ensure a successful listing.

 

 

*All sources from Bloomberg unless otherwise specified